Prep Now, Fret Less

The tax code can be a labyrinth to navigate. Nevertheless, taking action now – while you, your financial advisor and accountant have time to think through the possibilities and maximize your 2018 tax savings – could be more than worth the effort. Consider adding one or more of these four tax-mitigating moves to your capital gain/loss harvesting and year-end charitable giving.

Tip 1: Defer your year-end bonus or postpone income

Who can benefit? Those who think they’ll be in the same or lower tax bracket next year.

What is it? Save on this year’s higher taxes by withholding your bonus or postponing income until next year when you may be in a lower tax bracket.

Tip 2: Accelerate deductions

Who can benefit? Those who think they’ll be in a lower tax bracket next year.

What is it? If you anticipate higher taxes this year, accelerate deductions (e.g., philanthropic donations, prepaid state income and property taxes) to get a larger percentage tax benefit. Bonus: Reducing this year’s adjusted gross income also may keep you under the 3.8% Medicare surtax threshold.

Tip 3: Accelerate income and/or postpone deductions

Who can benefit? Those who think they’ll be in a higher tax bracket next year.

What is it? If you anticipate higher taxes next year, perhaps due to an increase in income, accelerating income and postponing deductions may help reduce your 2019 tax bill. Consider selling assets at a gain, billing in advance or deferring deductions until next year.

Tip 4: Be very generous

Who can benefit? High-net-worth families who want to donate significant amounts.

Did you know you can use a credit card to make a charitable gift in December and you can still claim the deduction for 2018, even if you pay the bill in January 2019?

What is it? If you want to make a generous charitable gift, consider doing so before year-end or establishing a donor advised fund, which allows you to receive an immediate federal income tax deduction even if the funds will not be disbursed until later years. If tax rates do go down in 2019, you will receive a larger tax benefit from the deduction since tax rates could be higher this year.

If you won’t have sufficient itemized deductions to exceed the increased standard deduction, you may wish to bunch deductions by making a large charitable gift, equal to the total donations you would have made over several future years. This could help you take advantage of the ability to itemize this year, while in other years you would take the standard deduction.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James Financial Advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Investment advisory services offered through Raymond James Financial Services Advisors, Inc.. Bush, Polen & Associates is not a registered broker/dealer and is independent of Raymond James Financial Services.